Sous les pav&#233s, rien que la plage?

13 June 2003

France faces a wouldbe general strike over pension reform. This political street theatre matters, and has more than local importance. Reform must win if outsiders are to believe Europe has an economic future. Even the contested pension changes are quite inadequate.

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The French National Assembly is in the middle of an elevenday debate on the government's proposed new pensions law, while trades union activists have continued a long series of street protests against the changes. One major union, Force Ouvriere, is calling for a general strike; the government has declared many private sector walkouts illegal for want of proper notice.

The government wants to close a E43bn funding shortfall expected in France's payasyougo pension system in 2020. Its most controversial proposal involves progressively lengthening the contribution period for a full pension to 41.75 years by 2020. Most affected by the change are public servants, who can currently retire after 37.5 years of contribution. Other provisions of the law allow more flexibility in assessing workers' contribution history and more freedom for workers themselves to choose when to retire. The draft law also introduces a new tax incentive for personal savings for retirement, and proposes a modest (0.2%) increase in pension contribution rates.

The reform package reduces the forecast E43bn deficit by E18bn. The remaining shortfall is to be partly met by contributions increase offset by a reduction in unemployment insurance contributions linked to reforms to unemployment benefit and to lower forecast unemployment. The balance, a forecast E15bn deficit in public sector pensions, will be met by an "extra effort by employers".

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